exclusive
New regulations for biodiesel have been in effect since 2023 – the use of fresh palm oil is no longer permitted in Germany. But there is increasing evidence that imports from Asia are circumventing the rules.
There are substances that are omnipresent and yet barely visible. Biodiesel is such a substance. Every diesel driver in Germany fills up with biodiesel. The mineral oil companies can add up to seven percent of the fuel to fossil diesel in order to achieve legally prescribed climate goals. By the end of 2022, a lot of biodiesel was produced based on fresh palm oil, but its carbon footprint is too bad. As of this year, this palm oil biodiesel is no longer accepted in Germany.
Shortly before the stricter regulations for biodiesel came into force, market participants noticed dramatic changes on the global market. So does Claus Sauter. He is CEO of the German Verbio group. His company is a big player in the biofuels market. “We have observed that imports of biodiesel from China have increased dramatically. They have multiplied,” said Sauter. He concluded from this that something was not happening properly.
Striking import figures
With increasing imports from China, doubts arose in Europe as to whether the imported biodiesel was really free of fresh palm oil. The Chinese imports are apparently mostly declared as biodiesel from used cooking fat or wastewater from palm oil production. This biodiesel from waste materials is permitted in Europe. This biodiesel is particularly attractive for importers because it can sometimes be counted twice towards the greenhouse gas reduction. Simply put, one ton of waste biodiesel corresponds to two tons of climate credit.
At the same time as the increasing exports of biodiesel to Europe, China suddenly imported more and more biodiesel based on fresh palm oil from Indonesia and Malaysia, even though there is no significant consumption of the biofuel in China. Market observers suspect that the goods were simply relabeled and resold to Europe. Because in the finished biodiesel it is hardly possible to determine later whether fresh palm oil or old cooking fat was used in production.
“It’s really about a lot of money. That’s more attractive than drug trafficking,” says Sauter. According to price information service Argus Media, profits of $300 to $565 per ton were possible this year. Overall, profits are likely to amount to several hundred million euros.
Relabeled and resold?
Research by Panorama 3 suggest that the relabeling of the goods takes place, among other places, at a port on the island of Hainan in the South China Sea. A biodiesel dealer describes a visit there. He wants to remain unrecognized for fear of consequences for his company.
At the beginning of 2023 he was on the island of Hainan to look at a fuel farm. He was then told that biodiesel was being collected in a huge tank so that it could be used to load a seagoing ship to Europe. “I asked: Where does that come from? I learned: From China and from Indonesia.” Biodiesel from palm oil and biodiesel from old cooking fat ended up in a tank, reports the witness.
“Then I realized that there was a game being played here.” Here, on paper, palm oil biodiesel was turned into cooking fat biodiesel, says the witness. However, this information cannot be proven. The port company in Hainan did not answer questions. The Chinese embassy in Berlin also left questions unanswered.
Many oil companies that are believed to have acquired Chinese biodiesel do not want to comment specifically on the issue or claim that they followed all the rules when trading. However, these rules in the biodiesel business apparently did not prevent massive market distortions from occurring. This may also be due to the fact that the rules in the EU are complicated and in the end it does not always seem to be clear who actually takes responsibility for errors in the system.
Complex testing system
A multi-stage checking process is intended to prevent misuse. However, no one seems to want to take responsibility for deficiencies in market controls. The EU has recognized a total of 15 certification systems where biodiesel producers and traders can be certified if they sell “sustainable biofuels”.
By far the largest is the International Sustainability and Carbon Certification (ISCC), a company based in Cologne. ISCC does not answer questions and refers to information on the website. After the first allegations of fraud emerged in the spring, the ISCC requested information from the certified companies. As a result, several Chinese companies had their sustainability certificates revoked. ISCC does not explain why this happened in individual cases. The private company promises improvements to the system in the future.
The ISCC certification system apparently does not primarily see itself as responsible for the problems that have arisen. Because ISCC does not control the companies itself, but leaves this business to auditing companies, so-called auditors. These in turn are each monitored by a state authority. The Bonn Federal Institute for Agriculture and Food (BLE), which reports to the Federal Ministry of Agriculture, is responsible for German auditors.
Although BLE employees in Europe are allowed to look over the shoulders of auditors while they work in biodiesel plants, they are not allowed to do so in China. China would not allow this, confirms the BLE. European audit firms often work with local staff in China. On paper, all the rules appear to be followed.
No consequences for European buyers
Auditor Rüdiger Meier from Braunschweig, who also controls biofuel plants with his company, doubts that everything is always done correctly in Asia. He has examined numerous biodiesel plants in Asia, but there often remain “doubts as to whether what is supposed to be certified there actually takes place,” says Meier. There is “obviously too much room for interpretation” in the test.
In the end, it doesn’t matter to buyers in Europe. Once a certificate has been issued, it enjoys protection of trust in the market. If it later turns out that the biodiesel purchased is not sustainable, companies in this country do not have to worry. This in turn annoys entrepreneur Sauter: “Oil companies that have bought this stuff don’t have to fear any consequences.”
Clarification questionable
Not only Sauter, but also some medium-sized oil companies are now demanding a complete investigation into the incidents. Whether this will actually happen is more than questionable. The BLE announced that after allegations of fraud arose, the EU Commission was immediately informed and a criminal complaint was filed. However, the responsible public prosecutor’s office in Bonn has already rejected investigations. The matter “does not fall under any criminal law”.
The EU Commission is now also looking into the incident. Whether and when these investigations will lead to a concrete result remains to be seen. The introduction of a new EU-wide database (Union Database, UDB) is intended to make it easier to understand where raw materials for biofuel production actually come from. This is intended to bring transparency to a previously opaque market.